The method by which commodities are traded on all or nearly all of the regulated commodity exchanges is called the "open outcry" system in which traders (local market makers, brokers and arbitrageurs) shout their bids and offers openly so that anyone may have the opportunity to accept any bid or pay any offer. When a transaction is executed, each trader writes the details of the transaction on his trading card including the designation of the contra party and the time of the trade so that reconciliation of the transaction (matching both sides of a trade) can be accomplished. The trading cards are standard multipart forms with minor differences reflecting the name and numerical designation of the clearing broker (the Futures Commission Merchant or FCM), and possibly aesthetic preferences. Each card has spaces for approximately 10 transactions and can be used only within the half-hour time bracket in which it was first used because cards are then collected by clerks to reconcile all trades. This is done each half hour so that most errors can be detected and corrected quickly, hopefully before the end of trading that day. When trading activity is very hectic and voluminous, this method of reconciliation is not as effective a desired and it is at such times that errors are most likely made and when errors are typically most costly.
Immediate reconciliation of trades would be a great advantage to traders who are handling many or large orders because errors may put them at enormous risk, as evidenced by the stock index futures traders who were forced out of business as a result of the stock market crash of October 1987. Depending on how the potential errors may occur, traders may find themselves to be long or short a large number of futures contracts when their desire was in fact to have no position. If they do not realize that an error has occurred until the next day, market gyrations can bankrupt them.
The situation does not stop with the trader's losses, however, because his FCM guarantees his trades to the Commodity Clearing Corporation (which stands between all buyers and sellers) and thus stands to lose whatever the trader either can't pay or refuses to pay. It is vital, therefore, that the FCM receives accurate reconciliation as quickly as possible.
The presently used method of clearing all trades requires an enormous keypunching effort each day and evening when every trade that was executed during the trading session has to be entered into the FCM's computer system. During this process, errors are introduced which produce an additional burden of detection and correction the following day. Implementation of the system proposed herein will eliminate all of the keypunching related to trades done by floor traders as principal, and most of the keypunching for customer trades.
The method by which transactions are reported to the public via the quote vendors generally involves clerks, who are called reporters, standing at strategic locations around the trading pit marking mark-sense cards as they see and hear transactions being consummated or quotations being made. An improvement to this procedure at some exchanges is the use of keyboards instead of marksense cards.
Use of the present invention, as will be discussed hereinafter, will eliminate the need for most reporters because the quote reporting will be automatic as a result of traders' entering actual trades or actual quotations. Accurate volume numbers will, therefore, be available which is not possible with the current technique. Additional powerful incentives for traders to report their transactions promptly with this system will be the knowledge that analytical programs will determine tardiness in transaction reporting, and the desire to inform the public immediately that a trade was consummated at that price. Another advantage that use of this invention provides is the accurate determination of opening and closing price ranges in hectic markets.
Although not related specifically to the present invention, one patent which is of interest to note as a background to the present invention is U.S. Pat. No. 4,674,044 which issued to L Kalmus et al. This patent reveals data processing based apparatus which makes automated trading markets for one or more securities. The system retrieves the best obtaining bid and asked prices from a remote data base, and covers the ensemble of institutions and the like, making a market for the relevant securities. Data characterizing each securities buy/sell order requested by a customer is supplied to the system. The order is qualified for execution by comparing its specifics against predetermined stored parameters. The stored parameters include the operative bid and asked prices, the amount of stock available for customer purchase or sale, and a maximum single order size. When qualified, the order is executed and the appropriate parameters are updated. The system provides inventory control and profit accounting for the market maker. The system also reports the executed trade details to the customer and to national stock price reporting systems. Upon a change in the quoted price for a security, the system updates all relevant qualification parameters. As will be shown hereinafter, this system does not relate to portable transaction station arrangements of the type to be disclosed hereinunder, nor does it relate to a computer system embodying the various features of the present invention.
Another patent which provides some of the background for the present invention is U.S. Pat. No. 3,956,615 which issued to T. Anderson et al. This patent reveals a transaction execution system including a host data processing system having a multiple account data base and a plurality of transaction terminals in communication with the host. The terminals each include a keyboard, a display, document handling subsystems, a hardware control subsystem, a communication subsystem and a programmable control subsystem supervising the other subsystems. A user initiates a transaction request by inserting a card into one of the terminals. After reading acceptable account identification information from the card, the terminal requests entry of a pre-assigned personal identification number through the keyboard. The host makes a verification with the identification number received from the terminal.
Still another patent providing some of the background for the present invention is U.S. Pat. No. 4,484,304 which issued to R. Anderson et al. This patent shows a transaction execution system in which key initiated transaction requests at a terminal remote from, but in communication with a host data processing system, is processed under the control of the host. Each transaction key at the terminal keyboard is assigned one of three different states by a financial institution table. Transactions requested by keys having a data entry state are handled within the terminal and with the additional consumer entered data required to complete the transaction being requested by and received by the terminal using sets of messages previously stored in the terminal by the host data processing system. Transactions designated by an interactive key state take place within, and involve, interactive communication between the terminal and the host, enabling the responses and other communications generated by the host in connection with a transaction for a particular customer to be customized. Message storage within the terminal and communication of messages to the terminal from the host are simplified by storage of segments of messages at the terminal.
As will be seen, the patents mentioned above do not anticipate the general objects and features of the present invention, especially as regards the application of uniquely designed, portable stations and the cooperation thereof with a central computer or host station.